If you multiply a firm's equity multiplier by its return on assets (ROA), you arrive at the firm's return on ________.
A) investment
B) equity
C) capital
D) liabilities

Question

Quizplus · Accepted Answer

The equity multiplier is calculated as assets divided by equity. Multiplying it by ROA gives us (assets/equity) * ROA = (assets/total capital) * ROA = return on equity. Therefore, the answer is B, return on equity.

If You Multiply a Firm's Equity Multiplier by Its Return